Products March 5, 2007

Pershing’s LoanAdvance Adds Ability to Used SMA Assets as Collateral

Pershing , a subsidiary of The Bank of New York Company, has revamped its securities-based consumer lending to give clients the ability to increase their current borrowing power by pledging assets held in separately managed as collateral for their loans.
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According to a company press release, the updated version of the securities-based consumer lending tool LoanAdvance eliminates the need to liquidate securities or moves assets into separate collateral accounts, thus making lending management more efficient.

LoanAdvance can’t be used to purchase securities, and is available to Pershing’s qualified introducing broker-dealer customers and their clients as well as to qualified independent registered investment advisers and their clients through Pershing’s affiliate, Pershing Advisor Solutions LLC.

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Through LoanAdvance, Pershing’s customers and their clients can borrow up to 70% of the market value of qualified equity, mutual fund, and investment-grade corporate or municipal bond securities, as well as up to 90% of the market value for U.S. Treasury securities.

“These enhancements will provide our introducing broker-dealer and independent registered investment advisor customers with a flexible solution that will help them meet their individual clients’ liquidity and financing needs,’ said Ron Fiske, managing director of the product management and development group at Pershing, in the release.

In Practice March 4, 2007

Retirement Income Space Offers Opportunities, Challenges

James McCarthy, Managing Director, Retirement Solutions at Morgan Stanley said there are two approaches to retirement product development.
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Those approaches are (1) a retirement experience “around” a product and (2) retirement income “within” a product. Firms that offer product around a product “own” client relationships and have existing relationships with participants so there is already contact. A question here, McCarthy said, speaking at the Securities Industry and Financial Markets Association (SIFMA) Savings and Retirement Symposium in Washington, DC last week, is whether simply knowing the client by being a point of contact on the retirement plan is enough. Currently, that connection point seems to be the hurdle, and so being the provider is enough to connect with the participant. The question, McCarthy said, is whether that will continue to be enough.

Products offered “within” are those designed to be offered in or on the platforms of other distributors, McCarthy said. They might be supposed to be used as a component of an overall solution – but, depending on how they are positioned on the platform, they might not be used that way.

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There are some unique benefits to working at insurance company when it comes to addressing the retirement income market, James Brockelman, Executive Vice President at John Hancock Retirement Services, said; insurance companies will be in a good position moving forward and they have a capacity to create products for the Baby Boomer generation. Insurance companies can give people downside protection which, although participants will have to pay for that added level of protection, can really help secure retirement. “The whole retirement income initiative is a huge opportunity for providers,” Brockelman said.

In the retirement income marketplace insurers are leading the way currently, but structured product manufacturers are converging McCarthy said; insurers may have a head start of decades, but that might only be worth another 12 months of being ahead of the curve, he predicted.

Steve Ulian, Senior Vice President with Fidelity Institutional Retirement Services Company said he believes that there will be a place for annuities, whether they are fixed, variable, or some other type, in a retirement income plan. He said that putting these type of products within plans is not as simple as most investment options. Fidelity has one plan going live with a generated income product in May, he said and operationally there is a significant amount of work necessary to put these types of products into a defined contribution plan.

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